No need to be glum about state we're in

Matt Wade

Cheer up Sydney - the weather might not be very summery but all is not lost for the Premier State.

I think the grumbling about our clogged roads, the cost of living, house prices and slow growth is sometimes overdone. And there's no doubt political rhetoric about the state's economic health often goes too far. When Barry O'Farrell talks about the need to ''rebuild the economy'' he makes it sound a bit like NSW is struggling to overcome the trauma of war, like Afghanistan or Iraq.

We need to get a little perspective.

O'Farrell talks a lot about the need to make NSW ''No. 1 again''. But if size is the measure, the NSW economy is firmly entrenched in the Federation's top spot.

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The Bureau of Statistics' latest economic report card on the states showed NSW's gross state product was a chunky $438 billion last financial year, way ahead of second-placed Victoria on $317 billion. Output in Western Australia, the Federation's rising economic star, was still less than half that of the Premier State.

Yes, NSW's share of the national economy has declined by a couple of percentage points in recent years. Victoria's share is also lower. The big winner is Western Australia, which has recorded a surge in its share of almost five percentage points in the past seven years thanks to Asia's demand for its raw materials. Global economic forces mean there's little chance of NSW emulating Western Australia - it's no longer a useful economic comparison.

But I suspect all the talk of NSW being stuck in the economic ''slow lane'' compared with resource-rich states has made us unnecessarily gloomy.

It's worth remembering how fabulously rich we are. If NSW was a separate country, it would rank around the 25th biggest economy in the world when roughly measured in nominal US dollars. Not bad for a region of just 7.3 million people.

Despite our slow lane growth, the state's economic output has increased by a handy $108 billion in the past five years and gross state product per capita has grown from $48,692 to $60,384, still comfortably higher than the other states except resource-rich Western Australia.

Average full-time earnings in NSW - close to $70,000 a year - are also second only to Western Australia's. Wages are still higher in NSW than Queensland despite the huge pay packets going to workers in that state's huge mining industry. And don't forget the big salaries in the mining sector are often earned in hot, remote places where the work can be very hard. Workers in Sydney have relatively high average wages and a very high quality of life, notwithstanding the odd traffic jam. Many have stimulating jobs performed in air-conditioned comfort close to cafes, beaches and parks. Not to mention some of the world's best hospitals and universities. That sure beats the fly-in, fly-out lifestyle and long hot days working on an offshore rig.

If conditions in Sydney are as miserable as some make out, it's hard to understand why people are prepared to pay so much to live here. This year 7648 houses have been sold in Sydney's 112 suburbs with a median house price above $1 million according to Australian Property Monitors. That's almost double the number of homes sold in Melbourne's 27 neighbourhoods with a median price more than $1 million. There were 668 houses sold in Sydney suburbs with a median price above $2 million and 185 in suburbs with a median above $3 million. But those totals can't even be compared with other Australian cities because they don't have any suburbs with medians that high.

Recent figures on the NSW economy also challenge the pervading gloom. The state has added more jobs than all the other states combined so far this financial year.

NSW was the only state to register a fall in unemployment last month and the jobless rate - 5.2 per cent - is below the national average. Most of the world's advanced economies can only dream about unemployment that low.

It's easy to forget that many of the state's regions are doing well. Soaring coal prices have benefited the Hunter region, which has experienced a wave of resource-related investment. High prices for many rural commodities mean times are fairly good in the state's important agricultural sector.

And remember NSW is by far the biggest labour market in Australia, employing 3.6 million people - about three times more than Western Australia.

If you are still not convinced, consider the glowing remarks about NSW from global market players. Last week, Fitch Ratings upgraded NSW's credit rating to the highest possible level praising the state's ''stable and diversified economy''. Meanwhile, foreign investors, impressed by our strong institutions and solid growth prospects, are lining up to get a stake in the state's assets. When the state government recently called for expressions of interest in a long-term lease of Sydney's desalination plant, a large group of investors from Europe, North America and across the Asia Pacific responded.

There's no doubt the chaos and dysfunction in the previous government's dying years was bad for the state. But the economic damage was probably not as devastating as many imagine. ''Things are more solid in NSW at the moment than most people realise,'' says veteran private sector economist Chris Richardson.

NSW has under-invested in infrastructure and, as always, there are many potential reforms that could boost efficiency. Of course, the lingering global economic problems could take a toll on the state next year.